Investors Who Held Steady After the Great Recession Have Been Rewarded

In
the decade since the Great Recession of 2007, Fidelity Investments has found
mixed reactions from investors who have been with the markets since that time.

Those who did not flee to cash but remained invested have portfolios that are
50% higher than those who sought safety, Fidelity found. However, 25% of people
have reassessed how much risk they can handle and have moved to more
conservative portfolios, where they have remained in the past 10 years.

Today, only 38% of people feel more confident in their investment approach than
they did in 2007, down from 48% in 2012.

“Although there are many reasons why people chose to exist the market, looking
back a decade later, investors who managed to stay the course have enjoyed
better results,” says Ken Hevert, senior vice president of retirement at
Fidelity. “What we’ve seen in the ensuring years is proof that the most prudent
investors are those who resist being reactive and instead keep their financial
objectives firmly in mind by looking past market volatility. No one knows when
the next market downturn will take place, but those who learned from the last
great financial crisis are more likely to be better positioned to weather
future financial storms.”

Fidelity notes that from late 2007 to early 2009, the S&P 500 lost
40% of its value; however, between June 2007 to today, the S&P is up 97%.

NEXT: Four lessons from the Great
Recession

Fidelity
says the first lesson investors should take to heart is to keep their eyes on
the long term. Baby Boomers’ average 401(k) account balance in June 2007 was
$115,000. Boomers who continued to contribute to their account saw that balance
grow to $315,000 this past June—a near tripling of wealth in 10 years.

The second lesson investors should consider, Fidelity says, is to save more and
reduce debt. The company’s survey of 1,205 investors asked them what actions
steps they have taken since the Great Recession. Thirty-six percent said it has
been to reduce debt, and 26% said it has been to save more. Fidelity says its
recordkeeping data shows that retirement plan participants saved an average of 7.7% of their
salaries as of the second quarter of 2007. A full decade later, that is now 9.5%.

The third
lesson, according to Fidelity, is to have a diversified portfolio of stocks,
bonds and cash. The fourth and final lesson Fidelity offers to investors is to
work with a financial adviser. Fidelity found from its survey that those
investors who have an adviser are saving more (31% versus 23%) and are more confident
about their approach to investing than those who do not have an adviser (50%
versus 31%).

Hevert notes that by working with an adviser, investors are more likely to
remain committed to the markets.